Taken at face value, "Property is theft!" appears to be an oxymoron, because theft, by definition, means depriving someone of his property. However, Proudhon had his own specialized definition of property in What is Property. By property, he was referring to ownership of land and the means of production, being used to subjugate the labor of others:

"The peasant who hires land, the manufacturer who borrows capital, the tax-payer who pays tolls, duties, patent and license fees, personal and property taxes, &c., and the deputy who votes for them, — all act neither intelligently nor freely. Their enemies are the proprietors, the capitalists, the government." 
He proposed that "the laborer retains, even after he has received his wages, a natural right of property in the thing which he has produced." Taking away this property of the labourer (as is normally done in an employer-employee relationship), is theft. However, "instead of inferring from this that property should be shared by all, I demand, as a measure of general security, its entire abolition."

Similar sentiments were expressed nearly two hundred years earlier by the English Diggers, who are considered proto-anarchists by many: "And that this Civil Propriety is the Curse, is manifest thus, Those that Buy and Sell Land, and are landlords, have got it either by Oppression, or Murther, or Theft"

Proudhon did not oppose property in the sense of individual ownership of the product of one's labor, and as such he also declared, "Property is freedom". He believed that individual property rights were essential to liberty. He says: "The absolute right of the State is in conflict with the absolute right of the property owner." He used the term mutualism to describe his vision of a society where individuals and democratic workers associations could trade their produce on the market. In this system, he supposes exchange value to be determined by the amount of labor required to produce a commodity, in line with the labor theory of value.

Many misinterpret Proudhon's "property is theft" to mean he opposed individual ownership of property; however, he only opposed property status as decreed by States. Proudhon attempted to clear up this misunderstanding when he later wrote:

"Property [is] a triumph of Liberty. For it is born of Liberty ... Property is the only power that can act as a counterweight to the State, because it shows no reverence for princes, rebels against society and is, in short, anarchist."

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